Ditch tax raids and go for growth, Su­nak told

The Daily Telegraph - Business - - Front Page - By Rus­sell Lynch

THE Con­fed­er­a­tion of Bri­tish In­dus­try has urged min­is­ters to “go for growth” amid fears of a dev­as­tat­ing tax raid and 1.6m job losses as the fur­lough scheme ends in a night­mare au­tumn.

Busi­ness lead­ers and se­nior economists are beg­ging Rishi Su­nak to ditch mooted tax rises in his au­tumn Bud­get, as he fights to re­pair the fis­cal wreck­age of the pan­demic.

In a veiled mes­sage to the Chan­cel­lor over tax, Josh Hardie, deputy di­rec­tor­gen­eral of the CBI busi­ness lobby group, said: “How­ever the Gov­ern­ment de­cides to han­dle debt, one thing is cer­tain – a grow­ing econ­omy backed by in­vest­ment will make it eas­ier.

“With so much un­cer­tainty ahead with the pan­demic and Brexit, now is the time to go for growth.”

It is feared that any in­crease in taxes would be counter-pro­duc­tive as Bri­tain strug­gles out of one of its deep­est ever re­ces­sions. Ru­moured plans to raise cor­po­ra­tion tax from 19pc to 24pc and tar­get wealth creators with higher cap­i­tal gains taxes could ul­ti­mately drive down the Ex­che­quer’s tak­ings by trig­ger­ing mass avoid­ance.

Mike Cherry, na­tional chair­man of the Fed­er­a­tion of Small Busi­nesses, warned tax rises should be the last thing on the minds of pol­i­cy­mak­ers.

He said: “It’s an ap­proach that would send com­pletely the wrong mes­sage to those who are out of work and think­ing about start­ing up their own ven­ture.”

Economists have fore­cast that se­vere job cuts al­ready felt across cor­po­rate Bri­tain could swell into a tsunami as the tax­payer-funded fur­lough scheme is wound down next month. From to­day, Job Re­ten­tion Scheme rules will be tight­ened fur­ther as the Trea­sury only pays 70pc of em­ploy­ees’ nor­mal wages up to a cap of £2,187.50, with em­ploy­ers re­quired to top this up to 80pc. The scheme has pro­tected 9.6m jobs so far.

Ex­perts at KPMG pre­dict a 10.3pc growth slump for the UK this year, with a sec­ond lock­down po­ten­tially trig­ger­ing an even deeper 12.6pc de­cline.

The end of the fur­lough scheme will send un­em­ploy­ment shoot­ing to a peak above 9pc in the fi­nal quar­ter of 2020, Yael Selfin, its chief econ­o­mist, warned – more than twice as high as the 3.9pc cur­rent level and equiv­a­lent to some 1.6m work­ers los­ing their jobs.

This pre­dicted peak is higher than the 7.5pc fore­cast by the Bank of Eng­land and the re­cov­ery will take longer, Ms Selfin added. It is feared the econ­omy is now go­ing through deep and long-last­ing struc­tural change as mil­lions of work­ers per­ma­nently aban­don the of­fice to do their jobs re­motely – wrecking town and city cen­tres.

Ms Selfin said: “We ex­pect un­em­ploy­ment to fall very grad­u­ally this time as well, be­cause of the in­ter­twin­ing of struc­tural changes and the eco­nomic shock cre­ated by the pan­demic.”

KPMG’s fore­casts of an 8.4pc re­cov­ery in growth dur­ing 2021 are based on a Brexit deal be­ing struck with the Euro­pean Union by the end of the year and a Covid-19 vac­cine be­ing ap­proved in Jan­uary. Fail­ure on both counts could mean the UK bounces back at less than half this pace, it added.

Busi­ness lead­ers have urged Mr Su­nak to tur­bocharge hir­ing through tax cuts. Mr Cherry added: “We have to bring down the up­front costs of hir­ing. That starts with re­duc­ing em­ployer Na­tional In­surance con­tri­bu­tions.”

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